Prompted by customer complaints about the slowness of streaming video in peak evening hours, the regulator, ARCEP, examined if Iliad was hampering YouTube in a bid to get Google to pay money to help boost capacity on the overloaded network.

Many Internet providers and telecom operators globally have argued that companies like Google and Netflix, which generate massive traffic on networks, should help pay for them instead of getting a free ride.

Iliad's larger competitor Orange has disclosed that Google pays millions of euros annually to help upgrade capacity to ensure its services run well for Orange customers.

Competition regulators in Brussels raided the offices of three of Europe's biggest telecom operators earlier this month as part of an investigation into whether they abused their market position in deals with Internet companies to deliver content to consumers.

However, ARCEP said on Friday Iliad was not intentionally limiting the delivery of YouTube traffic, which would violate the principle that all Internet data should be treated equally.

Instead, it said interconnection points between Iliad's network and the middlemen used to deliver Google's YouTube simply did not have enough capacity to handle the traffic, leading to slowdowns.

Adding capacity to those interconnection points was Iliad's choice as a business, and if it chose not to, then consumers had the power to choose another broadband provider, it added.

"The inquiry did not reveal that (Iliad) was employing traffic management techniques on its network that differentiated traffic routing conditions based on the type of content, its origin, its destination or the type of protocol used," the regulator wrote in a decision.

Iliad did not immediately reply to a request for comment.

ARCEP stepped in when a survey of more than 16,000 broadband customers by French consumer group UFC Que Choisir found 83 percent of Iliad's customers, 47 percent of Orange customers and 46 percent of Vivendi's SFR customers could not use YouTube properly.

The fact that ARCEP did not find any infractions shows how difficult it is for regulators to ensure consumers are being treated fairly when opaque commercial agreements between internet providers, the middleman or transit companies, and content giants often determine users' experience of the web.

To try to get a better handle on what is happening, ARCEP has begun collecting Internet quality indicators from companies and individuals and will publish its first results by year-end.